Allowances, Deductions and Tax Credit in Spain
Tax credit in Spain is generally very different from what many expats and foreign business owners are accustomed to in their home country. Spanish tax law seems to favor tax relief in the form of allowances and deductions rather than actual credits, which can make the system even more difficult for outsiders to understand (as if tax law weren’t complicated enough already!). This article will provide a brief overview of the concept of tax credit in Spain and what it means practically for non-Spaniards. However, this is no substitute for professional advice from a legal expert or financial advisor, as each person and each company has unique circumstances that need to be taken into account.
Foreign tax credit in Spain for businesses
There are a variety of incentives offered by the government here to both Spanish and foreign businesses alike. So, while there isn’t truly a foreign tax credit in Spain per se, relief is available to all companies meeting certain requirements. For example, if your business is located in certain places in Spanish territory (Ceuta, Melilla, etc.), you may be eligible for a corporate income tax credit of 50%. Tax credit in Spain is also offered as an incentive for investing in research and development, for hiring workers whose disability level is at least 33%, or for investing business profits in new business real estate or other tangible assets.
Tax rate credit in Spain for individuals
All natural persons who are Spanish residents and pay income tax in Spain are entitled to some relief in the form of exemptions. While this is not properly a tax rate credit in Spain, it can substantially reduce your liability, especially if you are married or have dependent children or elderly parents. The personal allowance for someone less than 65 years old is €5,550, plus an additional €3,400 for a spouse and progressive allowances for each child living with you under age 25.
Working tax credit in Spain
Unfortunately, many of the tax benefits that you might enjoy in your home country will not be transferable to Spain. Examples are the working tax credit, which in Spain has no equivalent and which does not transfer for UK expats. Child tax credits may be transferable under specific circumstances. It is best to consult a legal professional if you have any doubts about eligibility and transferability of benefits and tax credits in Spain.
Tax credit working abroad
Spain has treaties with many countries to help foreigners avoid double taxation on the income they earn here. Depending on your home country, this sort of tax credit working abroad may be given as a rebate when you file your annual tax declaration, or may be excluded from your total taxable income that year. It is important to note, however, that your tax obligations will vary depending on whether or not you are considered resident in Spain for tax purposes. And even if you are a Spanish resident and earn all of your income in Spain, you may still be required to file an annual tax declaration or return with the tax agency in your home country.